Gujarat Industries Power Co Ltd. (GIPCL) - Director Report

Company director report

Your Directors have pleasure to present the Thirty Second Annual Report together withthe Audited Financial Statements of the Company for the Financial Year ended 31st March2017.

Financial Performance:

(Rs. in Lakhs)

2016-17

2015-16

Revenue from Operations

131056

135223

Other Income

7102

3621

Total Expenditure

88155

95104

Gross Profit : (before deducting any of the following)

50003

43740

(a) Finance Cost

7319

7557

(b) Depreciation

12587

11213

(c) Provision for Deferred Tax

773

1110

(d) Provision for Current Income Tax (including MAT credit entitlement)

6400

5035

(e) Other Comprehensive Income

2263

(47.80)

(Net of Tax)

Net Profit including other

25187

18777

comprehensive income:

Add : Balance brought forward from

12058

9836

Previous Year (including other

Comprehensive Income)

Surplus available for Appropriation

37245

28613

Appropriations :

General Reserve

8000

6000

Expansion Reserve

8000

6000

Dividend On Equity Shares

4915

4555

(including Dividend Tax) paid

Carried to Balance Sheet

16330

12058

TOTAL

37245

28613

Dividend:

Your Directors are happy to recommend a Dividend of Rs. 2.70 (Rupees Two and PaiseSeventy) per share on 151251188 Equity Shares of Rs. 10/- each fully paid up for theyear ended on 31st March 201 7 (Previous Year Rs. 2.70 per share). The Dividend ifapproved by the Shareholders at the ensuing 32nd Annual General Meeting (AGM) shall bepaid to those Shareholders whose names appear on the Register of Members of the Companyas on the Books Closure Date i.e. on 11th August 2017. In respect of shares held indematerialised form it will be paid to Shareholders whose names are furnished by NationalSecurities Depository Limited (NSDL) and Central Depository Services (India) Limited(CDSL) as beneficial owners as on that date.

OPERATIONS:

Vadodara Gas based Stations:

Station - I (145 MW):

During the year under review the Station generated 701.893 Million Units (MUs) at aPlant Load Factor (PLF) of 55.26% as against generation of 719.485 MUs at PLF of 56.49%during the preceding year. The Plant Availability Factor (PAF) was at 98.15% during theyear under review as against 96.71% during the preceding year.

Planned shutdown for Combustion Inspection of GT#1 Annual Maintenance of all the threeHeat Recovery Steam Generators (HRSGs) Hot Gas Path Inspection (HGPI) of GT#2 and MajorInspection of GT#3 HRSG was carried out during the year. In-house modification of InvertedGuide Vein (IGV) was successfully carried out in GT#3.

The Station achieved highest ever daily PLF @ 90.10% on 21.03-2017.

Station - II (165 MW):

During the year under review the generation was 59.011 Million Units (MUs) at a PlantLoad Factor (PLF) of 4.08% as against generation of 235.478 MUs at a PLF of 16.25% in thepreceding year. The Plant Availability Factor (PAF) for the Station was 33.42% for theyear under review as against 96.65% during the preceding year. PAF for the Station waslower due to expiry of Power Purchase Agreement (PPA) with Gujarat Urja Vikas NigamLimited (GUVNL) on 31/07/2016.

Annual Maintenance of HRSG was carried out during the year. HRSG kept underpreservation.

Your Directors are glad to inform that as a result of consistent efforts to operate thePlant auxiliaries at Optimum Level and energy conservation measures during the year underreview the auxiliary consumption has come down to 2.5% for the year under review which is0.5% less than the normative level of 3%.

It is also heartening to note that despite the ageing factor of the main Plantequipments the operating parameters i.e. output and heat rate have been maintained due toproactive operation and maintenance practices and vigilant monitoring of the performance.The improved PAF for Station I for the year under review is the testimony of ourcommitment.

PLF was low mainly due to prolonged backing down by State Load Dispatch Centre (SLDC).

Continuous efforts are made to maintain optimum available supply of gas for theStations. Currently out of total gas requirement for Vadodara Stations gas is tied upwith GAIL (India) Ltd. (GAIL). The remaining quantity is tied up with Gujarat StatePetroleum Corporation Ltd (GSPCL) for supply of Spot gas on "as and whenrequired" basis.

Long term agreement has been signed with Hettich India Pvt. Ltd. Vadodara for sharingthe available spare capacity of De-mineralized (DM) Water.

During the year under review sale of 50036 Kilo Litres (KL) DM water has been achievedas compared to sale of 21880 KL of DM water achieved during the preceding year anincrease of 115%. Your Company is planning expansion of DM water Plant and exploringpossibilities to lay DM water pipe line network to reach bulk customers in the nearbyIndustrial areas.

Long term agreement has been signed with Ishedu (Division of Jayant Agro Limited) forsharing the available spare capacity of infrastructure of Joint Water Supply Scheme (JWSS)of GIPCL and GACL. Services like Third Party Water Sample Analysis facilities onchargeable basis are also provided to interested parties.

During the year under review implementation of various energy conservation jobs aswell as new initiatives have been undertaken. Major energy conservation and efficiencyimprovement measures by way of modification in various auxiliary equipments and redefiningoperational parameters have been successfully implemented as elaborated in the AnnexureRs. C' annexed to this Report.

It gives immense pleasure to inform that the Vadodara Plant of your Company has beenconferred the National level "Energy Efficient Unit - Award - 2016" by theConfederation of Indian Industry (CII) Hyderabad.

Your Directors are pleased to inform that the Gas based Power Plant at Vadodara hasbeen awarded First Prize at the "National Energy Conservation Award - 2016" inThermal Power Plant Sector category by the Ministry Of Power (MoP) Govt. of India. SafetyPerformance:

The health and safety of all the employees is prime concern of the Company. YourDirectors are happy to inform that your Company is making sincere and committed efforts tomaintain the safety of Plant equipments and creating a safe and healthy work environmentfor the employees. Your Company has been spending sufficient amount for the health andsafety related activities. Constant efforts are made to maintain accident free operationsat all the locations. Your Company has adopted a comprehensive Health and Safety policyunder the Integrated Management System (IMS). Your Directors are glad to inform that theVadodara Plant has successfully completed accident free operations for the entire yearunder review i.e. FY 2016-1 7. Safety Audit has been planned through external competentagency to ensure zero accident and cover all employees and contract workmen for safetyrelated training.

Surat Lignite Power Plant (SLPP):

Phase-I (2 x 125 MW Units 1 & 2):

During the year under review Phase-I generated 1526.640 Million Units (MUs) at a PlantLoad Factor (PLF) of 69.71% as against 1643.210 MUs at a PLF of 74.83% during the previousyear. Plant Availability Factor (PAF) was 84.98% as against 89.03% during the previousyear. Low grid demand resulted into loss in PLF by 10.93% during the year under reviewagainst 10.57% during the previous year.

Less plant Availability / Generation during the year under review is mainly because ofplanned outage of both the Units. Capital Overhauling of Unit-1 and Annual Overhauling ofUnit-2 was carried out during the second quarter of F.Y. 2016-17. During the precedingyear Annual Overhauling of only Unit-2 was carried out. In Unit-1 minor maintenance workwas carried out during F.Y. 2015-16 for seven days.

Commercial availability was at 78.87% as against 83.74% during the previous year.

Phase II (2 x 125 MW Units 3 & 4):

During the year under review Phase-II generated 1651.556 MUs at a PLF of 75.41 % asagainst 1440.694 MUs at a PLF of 65.61 % during the preceding year. PAF was 87.80% asagainst 75.88% during the preceding year.

Commercial availability was at 86.41 % as against 75.1 7% during the previous year.

Constant endeavors are being made to improve the overall performance of the Unitsincluding technology improvement and modifications. The required maintenance program forthe upkeep of the Units was undertaken during the year under review.

Mining:

Your Directors are happy to inform that performance of Mining Division was excellentduring the year under review. During the year under review Valia Lignite Mine recordedthe highest ever production of 28.05 Lakh Te as against 26.84 Lakh Te during the precedingyear.

Total requirement of lignite was met from our captive Vastan Lignite Mine and Mangrol -Valia Lignite Mine. To meet the demand of all the four Units sufficient quantity ofLignite has been stocked for operations during monsoon.

Your Directors are glad to inform that during the year under review Valia Lignite Minehas won prizes for Rs. Overall' Rs. Thrust Area (Slope Stability)''Health First Aid& Vocational Training' 'Survey Office Plans and Sections' Rs. Best PublicityPropaganda & House Keeping' categories and Vastan Lignite Mine has won prizes for Rs.Maintenance of HEMM' and Rs. Health First Aid & Vocational Training' categories atGujarat level from Director General of Mines Safety.

It is a matter of pride for all of us to note that your Company has received threeNational Safety Awards (Mines) from the Ministry of Labour & Employment Govt. ofIndia at the hands of Hon'ble President of India viz. two Winner Awards for VastanLignite Mine for the year 2013 & year 2014 and one Runner Award for Mangrol LigniteMine for the year 2013.

5 MW PV based Solar Power Plant:

During the year under review 5 MW PV based Solar Power Plant at SLPP generated 7.58MUs with 17.30% PLF as against 7.73 MUs with PLF of 17.61% during the preceding year.

Less generation and PLF during the year under review was due to extended cloudy weatherduring monsoon season.

2 x 1 MW Distributed Solar Power Plants (DSPPs):

During the year under review your Company successfully commissioned the Govt. ofGujarat (GoG) sponsored Grid connected two Distributed Solar Pilot plants of 1 MW each atVillage Amrol Dist.: Anand in Central Gujarat in April 2016 and at Village VastanTaluka Mangrol Dist.: Surat in South Gujarat in May 2016 respectively.

These Power plants have been developed on Research & Development basis with novelconcept of cultivation of agriculture crops under the Solar Panels by reusing water usedto clean the Solar Panels and drip Irrigation facility.

During the year under review the 1 MW Amrol DSPP generated 1.365 MUs at a CapacityUtilization Factor (CUF) of 16.83% and the 1 MW Vastan DSPP generated 1.21 MU at a CUF of15.20% respectively.

The DSPP have been acknowledged as one of the innovative Projects in the book titled"Book on Innovations - for the PM Award for Excellence' released by the Hon'ble PrimeMinister of India. Further your Directors are pleased to inform that this novel conceptof Agri Solar Power Project has received National Level "Golden PeacockEco-Innovation" Award of the Institute of Directors New Delhi.

Environmental Protection:

The Company recognizes Environment Management as an integral function of itsoperations. Towards this end your Company has adopted appropriate technology for controlof pollutants at source.

Vadodara Plant:

Your Directors are pleased to inform that the initiative taken by your Company in 2012for providing water as well as oil testing analysis services to interested parties onchargeable basis as a part of diversification of activities and optimization of use ofavailable spare infrastructure and resources for increasing revenues has receivedencouraging response.

Your Company has also imposed total ban on using thermocol and plastic below 40 micronsize packing material for all incoming goods. Disposal of e-waste generated has beenarranged through Central Pollution Control Board (CPCB) registered Vendors.

Surat Lignite Power Plant (SLPP):

During the year under review your company replaced total internals of five fields andpartially replaced internals of two fields (out of fourteen fields) of Unit-4Electrostatic precipitator during the annual overhauling at a total expenditure of Rs.389.54

Due to inordinate delay in Project execution by LSML it was decided by your Directorsto terminate the LoI for 24 MW (16 x 1.5 MW) at the Jambarwada Site.

Thereafter in view of the financial difficulties faced by LSML the LoI for the 27 MWWind Based Power Project at Village Kotadapitha was truncated to 15 MW. The said 15 MWProject has been commissioned in November 2016.

During the year under review the 15 MW Kotadapitha Wind Farm generated 32.35 MUs at aCUF of 28.04%.

97.4 MW Wind Power Projects:

Your Directors are pleased to inform that the 97.4 MW Wind Farms at various locationsin Gujarat have been commissioned in phased manner by March 201 7 i.e. ahead ofschedule. During the year under review the 26 MW Rojmal Wind Farm generated 13.29 MUs ata CUF of 13.12%; and the 71.4 MW Wind Farms at three different locations generated 36.47MUs at a CUF of 22.15%.

2 x 40 MW Solar Power Projects at Gujarat Solar Park Charanka: Your Directors arepleased to inform that your Company had emerged as successful Bidder in the e-reverseauction for 2 x 40 MW Solar Power Projects at Gujarat Solar Park Village Charanka Dist.:Patan Gujarat under the National Solar Mission Phase II Batch IV on EPC basis. TheCompany has issued two LoIs to M/s. Vikram Solar Private Limited (VSPL) Kolkata for thesaid two Solar Power Projects.

Your Directors are happy to inform that 40 MW capacity has been successfullycommissioned and certified by Solar Energy Corporation of India Limited (SECI) and thebalance capacity will be commissioned by August / September 2017. There has been slightdelay in commissioning of the balance capacity due to heavy rain and floods in the areaduring July / August 201 7. Empanelment as Channel Partner by the Ministry of New andRenewable Energy (MNRE) Government of India (GoI):

Your Directors feel proud to inform that your Company has been empanelled by the MNREGoI as Channel partner under the Grid Connected Rooftop and Small Power Plants Programme.

Accreditation for Integrated Management System (IMS) under ISO certifications:

Your Directors are pleased to inform that during the year under review your Company hassuccessfully maintained standard guidelines for IMS covering ISO:9001:2008 ISO:14001:2004and OHSAS 18001:2007 certification for Quality Management System (QMS) EnvironmentManagement System (EMS) and Occupational Health and Safety Assessment Series (OHSAS) andISO 50001:201 1 for Energy Management System (EnMS) Certification for its Power Stationsat Vadodara and SLPP. Your company is one of the first group of Power Plants to haveimplemented and obtained ISO 50001:2011 Certification. Surveillance Audit for all theStandards have been successfully conducted and accredited by TUV India Ltd. in May 2017.Subsidiary:

During the year under review the Company's wholly owned subsidiary GIPCL Projects andConsultancy Company Limited (GIPCO) has been struggling to perform for the consecutivefifth year in the highly competitive service sector.

With a view to achieve administrative and operational convenience your Directors havedecided to merge GIPCO with GIPCL. The services offered / provided by GIPCO will becontinued through respective verticals of GIPCL.

Public Deposits:

During the year 2016-17 your Company has not accepted / renewed any Fixed Deposit. Asat the date of this Report there is No Deposit either unpaid / unclaimed or due fortransfer to Investors' Education and Protection Fund (IEPF).

Particulars of loans guarantees or investments:

Loans guarantees and investments covered under Section 186 of the Companies Act 2013form part of the Notes to the financial statements provided in this Annual Report.

Listing Regulations compliance:

Equity Shares of your Company are listed on Bombay Stock Exchange Ltd. (BSE) andNational Stock Exchange of India Ltd. (NSE) and their Listing Fees for the FY 2017-18 havebeen paid.

Insurance:

The properties and the insurable interest of the Company are adequately insured. YourCompany has also taken necessary insurance cover as required under the Public LiabilityInsurance Act 1991.

Corporate Social Responsibility (CSR) Initiatives:

As part of its CSR initiatives your Company has undertaken projects in the areas ofHealth Education Livelihood Development of Village Infrastructure Land loser focusedintervention Sanitation etc. These projects are in accordance with Schedule VII to theCompanies Act 2013.

Report on CSR activities is annexed to this Report as Annexure Rs. A'.

Energy Conservation and Technology Absorption:

The measures taken by your Company towards energy conservation and TechnologyAbsorption are given in the Annexure Rs. C' to this Report. These measures have resultedin conserving about 6.99 MUs electrical energy.

Related Party Transactions:

There was no materially significant Transaction made by the Company with Directors orKey Managerial Personnel or other designated persons which may have potential conflictwith the interests of the Company.

All related party transactions are placed before the Audit Committee as also the Boardfor approval. Omnibus approval of the Audit Committee has been obtained for transactionswhich are of repetitive nature.

Particulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 in the prescribed Form AOC-2 are given in Annexure Eto and forms part of this Report.

The Policy on Related Party Transactions (RPTs) is uploaded on the website of theCompany and can be accessed on the following link:

None of the Directors has pecuniary relationships or transactions vis-a-vis theCompany.

Vigil Mechanism or Whistle Blower Policy:

The Company has a Vigil Policy / Whistle Blower Policy to deal with instance of fraudand mismanagement if any. The said Policy is explained in the Corporate Governance Reportand also posted on the website of the Company at following link:http://www.gipcl.com/corporate-policies.htm Directors' Responsibility Statement:

The Board of Directors of the Company confirms:

a) that in the preparation of the annual accounts the applicable accounting standardshave been followed along with proper explanation relating to material departure;

b) that the selected accounting policies were applied consistently and Directors madejudgment and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at 31st March 201 7 and of the profit of theCompany for the year ended on that date;

c) that proper and sufficient care has been taken for maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d) that the Annual Accounts have been prepared on a going concern basis;

e) internal financial controls to be followed by the company have been laid down andthat such internal financial controls are adequate and operating effectively; and

f) Proper systems have been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

Corporate Governance:

A detailed report on Corporate Governance along with Certificate dated 18th May 2017issued by CS JJ Gandhi Practicing Company Secretary Vadodara is annexed forming part ofthis Report.

Management Discussion and Analysis:

A report on Management Discussion and Analysis dealing with Business Operations andPerformance Research and Development Expansion Project Safety and Environment HumanResource Development Corporate Social Responsibility etc. is annexed forming part of thisReport.

Risk Management:

The Board of Directors review the Report on Risk Management and Risk Minimization onquarterly basis. The provisions of Listing Regulations relating to Risk Management are notpresently applicable to the Company.

Directors:

Since the 31st AGM held on 23/09/2016 there were following changes in Board ofDirectors of your Company:

Accordingly pursuant to the provisions of the Article 95 of Articles of Association ofthe Company the Board of Directors has appointed Smt. Shahmeena Husain IAS as AdditionalDirector and Managing Director of the Company w.e.f. 20/05/ 2017 vice Smt. Sonal MishraIAS.

The Board places on record its sincere appreciation for the leadership and valuablecontributions made by Smt. Sonal Mishra IAS during her tenure as Managing Director ofthe Company.

The Company has formulated and adopted a Policy on Directors' Appointment andRemuneration and the same is accessible on the website of the Company: www.gipcl.com .

Performance Evaluation of Board Committees and Directors:

Pursuant to the provisions of Section 178(2) of the Companies Act 2013 your Companyhas constituted a Nomination & Remuneration (NR) Committee of Directors to evaluatethe performance of Directors on the Board.

Appraisal of each Director of the Company is based on the broad criteria mentionedbelow as required under the provisions of Section 134(3)(p) of the Companies Act 2013(the Act).

1. Knowledge of the Job Profile;

2. Various Directions provided in the best interest of the Company on key issues;review of compliance management;

The NR Committee shall evaluate the performance of each member of the Board ofDirectors with reference of the authority under the Nomination and Remuneration Policy ofthe Company framed in accordance with the provisions of section 1 78 of the Act and as perthe evaluation criteria mentioned above. Evaluation of Independent Directors shall becarried out by the entire Board in the same manner as it is done for other Directors ofthe Company except the Director being evaluated.

Based on the performance evaluation of each and every Director and the Chairman of theCompany the Committee shall provide the ratings based on each criterion.

Evaluation of Executive Director of the Company is done by the entire Board except theDirector being evaluated. The meeting for the purpose of evaluation of performance ofBoard Members is held at least once in a year. The Company has disclosed the criteria laiddown by the NR Committee for performance evaluation on its website for the reference andalso in the Annual Report of the Company.

Particulars of Employees:

The information required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company is not applicable as no Employee was paid remuneration during the year inexcess of Rs. 1.02 Crores when employed throughout the year and Rs. 8.50 Lakhs per monthwhen employed for a part of the year. Further there was no employee holding 2% or more ofthe equity shares of the Company during 2016-17.

The information required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofemployees of the Company will be provided upon request.

The details of top ten employees in terms of remuneration drawn during the year 2016-17is given at Annexure F to this Board's Report.

In terms of Section 136 of the Act the Report and Accounts are being sent to theMembers and others entitled thereto excluding the information on employees' particularswhich is available for inspection by the Members at the Registered Office of the Companyduring 3:30 p.m. to 5:30 p.m. on all working days of the Company up to the date of theensuing 32ndAGM. None of such employees is a relative of any Director of the Company. Noneof such employees hold [by themselves or along with their spouse and dependentchildren(s)] more than two percent of the equity shares of the Company.

Auditors:

Internal:

Vijay Tewar & Co. Chartered Accountants Vadodara (ICAI Firm Reg. No.:111422W)were appointed as Internal Auditors of the Company for the Financial Year 2016-17 and theyhave submitted their Report to the Audit Committee of Directors.

K N Mehta & Company Chartered Accountants Vadodara (ICAI Firm Reg. No.:106242W)have been appointed as Internal Auditors of the Company for the Financial Year 2017-18.The Audit Committee of Directors periodically review the reports of Internal Auditors.

Statutory:

The Members at their 30th AGM have appointed K C Mehta & Co. CharteredAccountants Vadodara (ICAI Firm Reg. No.:106237W) as Statutory Auditors of the Companyfor a period of five consecutive financial years i.e. from FY 2015-16 to FY 2019-20.Pursuant to the provisions of Section 139 of the Act appointment of Statutory Auditorshas to be ratified by the Members at every AGM. Accordingly resolution at Sr. No. 5 ofthe Notice of 32nd AGM is recommended for approval of the Members for ratification of theappointment of Statutory Auditors for the Financial Year 2017-18.

The Board of Directors has appointed Diwanji & Associates Vadodara (ICWA FirmRegistration No.:100227) as Cost Auditor of the Company for the Financial Year 2017-18.

Resolution at Sr. No.10 of the Notice of 32nd AGM is recommended for ratification ofthe Members for the remuneration payable to Cost Auditors for the Financial Year 201 7-18.

Secretarial:

JJ Gandhi & Co. Practicing Company Secretaries Vadodara (CP No. 2515) have beenappointed as Secretarial Auditor of the Company for the year 2016-17. Report of JJ Gandhi& Co. for the Financial Year 2016-17 ended on 31st March 2017 in the prescribedForm-MR 3 is annexed to this Report as Annexure Rs. B'.

Extract of Annual Return:

The details forming part of the extract of the Annual Return in prescribed Form MGT 9is annexed to this Report as Annexure Rs. D'.

Your Directors further state that during the year under review no case was filedpursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. Acknowledgements:

The Board of Directors places on record its gratitude and appreciation to theGovernment of India Government of Gujarat Financial Institutions Banks Insurancecompanies Business Associates Promoters Shareholders and Employees of the Company fortheir valuable support and faith reposed by them in the Company.